Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On July 24, 2018, Manhattan Associates, Inc. (“we”, “our”, “us” or the “Company”) issued a press release providing its financial results for the three and six months ended June 30, 2018. A copy of this press release is attached as Exhibit 99.1. Pursuant to General Instruction B.2 of Form 8-K, this exhibit is “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.

Non-GAAP Financial Measures in the Press Release

The press release includes, as additional information regarding our operating results, our adjusted operating income and margin, adjusted income tax provision, adjusted net income, adjusted diluted earnings per share and certain adjusted cost measures (collectively, “adjusted results”), which variously exclude the impact of equity-based compensation, acquisition-related costs and a restructuring charge, and the related income tax effects of these items, as well as the impact of the Tax Cuts and Jobs Act. We have developed our internal reporting, compensation and planning systems using these additional financial measures.

These various measures are not in accordance with, or alternatives for, financial measures calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) and may be different from similarly titled non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with GAAP.

Non-GAAP measures used in the press release exclude the impact of the items described above for the following reasons:

•

Equity-based compensation expense typically does not require cash settlement by the Company. We do not include this expense and the related income tax effects when assessing our operating performance, and believe our peers also typically present non-GAAP results that exclude equity-based compensation expense.

•

From time to time, we incur acquisition-related costs consisting primarily of (i) accounting and legal expenses, whether or not we ultimately consummate a proposed acquisition, (ii) certain unusual costs, such as employee retention benefits, resulting from pre-acquisition arrangements, and (iii) amortization of acquisition-related intangible assets. These costs are difficult to predict and, if and when incurred, generally are not expenses associated with our core operations. We exclude these costs and the related income tax effects from our internal assessments of our operating performance, and believe our peers also typically present non-GAAP results that exclude similar acquisition-related costs.

•

We do not believe that the restructuring charge related to a reduction in our workforce recorded in 2017 is a common cost that results from normal operating activities; rather, we believe that it relates to the headwinds in the retail sector and a realignment of our capacity with demand forecasts. We have excluded the charge from our internal assessment of our operating performance and non-GAAP results.

•

The enactment of the Tax Cuts and Jobs Act in December 2017 resulted in a provisional net one-time charge based on a reasonable estimate of the income tax effects. The charge was primarily from a tax on accumulated foreign earnings and the remeasurement of

1

deferred tax assets. We believe tax reform on the scale of the Tax Cuts and Jobs Act is infrequent, and that the resulting charge is therefore an unusual one. We have excluded the charge from our internal assessment of our operating performance and non-GAAP results.

•

In addition, to facilitate investors’ understanding of our business’ transition from perpetual software licenses to cloud-based subscriptions and the related changes to our income statement presentation, we have included our adjusted cost of services under our prior income statement presentation and our adjusted cost of cloud subscriptions, maintenance and services under our new income statement presentation. These adjusted results exclude the impact of equity-based compensation for the reasons described above.

We believe reporting adjusted results facilitates investors’ understanding of our historical operating trends, because it provides supplemental measurement information in evaluating the operating results of our business. We also believe that adjusted results provide a basis for comparisons to other companies in the industry and enable investors to evaluate our operating performance in a manner consistent with our internal basis of measurement. Management refers to adjusted results in making operating decisions because we believe they provide meaningful supplemental information regarding our operational performance and our ability to invest in research and development and fund acquisitions and capital expenditures. In addition, adjusted results facilitate management’s internal comparisons to our historical operating results and comparisons to competitors’ operating results.

Further, we rely on adjusted results as primary measures to review and assess the operating performance of our Company and our management team in connection with our executive compensation and bonus plans. Since most of our employees are not directly involved with decisions surrounding acquisitions, restructurings and other items that are not central to our core operations, we do not believe it is appropriate or fair to have their incentive compensation affected by these items.

“Q2 was another good quarter for our company with the underlying business fundamentals strengthening,” said Manhattan Associates president and CEO Eddie Capel. “Q2 total revenue and earnings per share performance improved over Q1 and were slightly ahead of our expectations. Based on our outlook for the
remainder of the year, we are raising our 2018 full-year guidance for total revenue and earnings.”

“While cautious regarding global geopolitical and economic volatility, we continue to be very bullish on the market opportunity ahead and are investing significant capital into transformative industry leading innovation. Our transition to Cloud continues as planned, and at our Momentum customer conference in May, we unveiled exciting product advancements, enabling our clients to Push Possible™ with their commerce supply chains,” added Mr. Capel.

SECOND QUARTER 2018 FINANCIAL SUMMARY:

•

We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions.

Consolidated total revenue was $141.9 million in Q2 2018, compared to $154.1 million in Q2 2017. License revenue was $13.0 million in Q2 2018, compared to $20.1 million in Q2 2017. Cloud subscription revenue was $5.4 million in Q2 2018, compared to $2.4 million in Q2 2017.

•

GAAP operating income was $35.7 million in Q2 2018, compared to $49.3 million in Q2 2017.

•

Adjusted operating income, a non-GAAP measure, was $40.7 million in Q2 2018, compared to $55.2 million in Q2 2017.

•

Cash flow from operations was $16.8 million in Q2 2018, compared to $11.3 million in Q2 2017. Days Sales Outstanding was 64 days at June 30, 2018, compared to 59 days at March 31, 2018.

•

Cash and investments totaled $83.4 million at June 30, 2018, compared to $119.0 million at March 31, 2018.

•

During the three months ended June 30, 2018, the Company repurchased 1,082,660 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors for a total investment of $47.9 million. In July 2018, our Board authorized the Company to repurchase up to an aggregate of $50 million of the Company’s common stock.

SIX MONTH 2018 FINANCIAL SUMMARY:

•

We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions.

•

GAAP diluted earnings per share for the six months ended June 30, 2018 was $0.75, compared to $0.85 for the six months ended June 30, 2017.

•

Adjusted diluted earnings per share, a non-GAAP measure, was $0.84 for the six months ended June 30, 2018, compared to $0.92 for the six months ended June 30, 2017.

•

Consolidated revenue for the six months ended June 30, 2018, was $272.4 million, compared to $297.6 million for the six months ended June 30, 2017. License revenue was $20.5 million for the six months ended June 30, 2018, compared to $41.3 million for the six months ended June 30, 2017. Cloud subscription revenue was $9.8 million for the six months ended June 30, 2018, compared to $3.9 million for the six months ended June 30, 2017.

•

GAAP operating income was $63.5 million for the six months ended June 30, 2018, compared to $91.0 million for the six months ended June 30, 2017.

•

Adjusted operating income, a non-GAAP measure, was $73.0 million for the six months ended June 30, 2018, compared to $101.5 million for the six months ended June 30, 2017.

•

Cash flow from operations was $68.1 million in the six months ended June 30, 2018, compared to $72.6 million in the six months ended June 30, 2017.

•

During the six months ended June 30, 2018, the Company repurchased 2,240,356 shares of Manhattan Associates common stock under the share repurchase program authorized by our Board of Directors, for a total investment of $97.8 million.

NEW PRESENTATION OF CONSOLIDATED STATEMENTS OF INCOME

We have reclassified certain line items in prior period financial statements to conform to the current period presentation in the consolidated statements of income because of our business transition to cloud subscriptions. These reclassifications include: all revenue line items; cost of license; cost of cloud subscriptions, maintenance and services; and cost of hardware. These reclassifications did not affect total revenue, operating income or net income. For further detail, please see note 7 in the supplemental financial information accompanying this press release.

2018 GUIDANCE

Manhattan Associates provides the following updated revenue, operating margin and diluted earnings per share guidance for the full year 2018:

Guidance Range - 2018 Full Year

($'s in millions, except operating margin and EPS)

$ Range

% Growth Range

Total revenue - current guidance

$

548

$

560

-8%

-6%

Total revenue - previous guidance

$

546

$

558

-8%

-6%

Operating Margin:

GAAP operating margin - current guidance

21.1

%

21.4

%

-10.1%

-9.8%

Equity-based compensation

3.7

%

3.6

%

Adjusted operating margin(1) - current guidance

24.8

%

25.0

%

-9.7%

-9.5%

GAAP operating margin - previous guidance

20.0

%

20.4

%

-11.2%

-10.8%

Equity-based compensation

4.0

%

3.9

%

Adjusted operating margin(1) - previous guidance

24.0

%

24.3

%

-10.5%

-10.2%

Diluted earnings per share (EPS):

GAAP EPS - current guidance

$

1.32

$

1.36

-21%

-19%

Equity-based compensation, net of tax

0.25

0.25

Adjusted EPS(1) - current guidance

$

1.57

$

1.61

-16%

-14%

GAAP EPS - previous guidance

$

1.23

$

1.27

-27%

-24%

Equity-based compensation, net of tax

0.25

0.25

Adjusted EPS(1) - previous guidance

$

1.48

$

1.52

-21%

-19%

(1) Adjusted operating margin and adjusted EPS are non-GAAP measures that exclude the impact of equity-based

compensation and acquisition-related costs, and the related income tax effects of these items if applicable.

Manhattan Associates currently intends to publish, in each quarterly earnings release, certain expectations with respect to future financial performance. Those statements, including the guidance provided above, are forward looking. Actual results may differ materially. Those statements, including the guidance provided above, do not reflect the potential impact of mergers, acquisitions or other business combinations that may be completed after the date of the release.

Manhattan Associates will make its earnings release and published expectations available on its website (www.manh.com). Following publication of this earnings release, any expectations with respect to future financial performance contained in this release, including the guidance above, should be considered historical only, and Manhattan Associates disclaims any obligation to update them.

CONFERENCE CALL

The Company’s conference call regarding its second quarter financial results will be held today, July 24, 2018, at 4:30 p.m. Eastern Time. We invite investors to a live webcast of the conference call through the Investor Relations section of Manhattan Associates' website at www.manh.com. To listen to the live webcast, please go to the website at least 15 minutes before the call to download and install any necessary audio software.

Those who cannot listen to the live broadcast may access a replay shortly after the call by dialing +1.855.859.2056 in the U.S. and Canada, or +1.404.537.3406 outside the U.S., and entering the conference identification number 6059039 or via the web at www.manh.com. The phone replay will be available for two weeks after the call, and the Internet webcast will be available until Manhattan Associates’ third quarter 2018 earnings release.

GAAP VERSUS NON-GAAP PRESENTATION

The Company provides adjusted operating income and margin, adjusted income tax provision, adjusted net income, adjusted diluted earnings per share, adjusted cost of services, and adjusted cost of cloud subscriptions, maintenance and services in this press release as additional information regarding the Company’s historical and projected operating results. These measures are not in accordance with – or alternatives to – GAAP, and may be different from similarly titled non-GAAP measures used by other companies. The Company believes the presentation of these non-GAAP financial measures facilitates investors’ ability to understand and compare the Company’s results and guidance, because the measures provide supplemental information in evaluating the operating results of its business, as distinct from results that include items not indicative of ongoing operating results, and because the Company believes its peers typically publish similar non-GAAP measures. This release should be read in conjunction with the Company’s Form 8-K earnings release filing for the three and six months ended June 30, 2018.

Non-GAAP adjusted operating income and margin, adjusted income tax provision, adjusted net income and adjusted diluted earnings per share exclude the impact of equity-based compensation, acquisition-related costs and the amortization of these costs, and a restructuring charge – all net of income tax effects, and the impact of the Tax Cuts and Jobs Act. Adjusted cost of services and adjusted cost of cloud subscriptions, maintenance and services exclude the impact of equity-based compensation. We include reconciliations of the Company’s GAAP

financial measures to non-GAAP adjustments in the supplemental information attached to this release.

Manhattan Associates designs, builds and delivers leading edge cloud and on-premise solutions so that across the store, through your network or from your fulfillment center, you are ready to reap the rewards of the omnichannel marketplace. For more information, please visit www.manh.com.

This press release contains “forward-looking statements” relating to Manhattan Associates, Inc. Forward-looking statements in this press release include, without limitation, the information set forth under “2018 Guidance,” statements we make about market adoption of our cloud-based solution and other statements identified by words such as “may,” “expect,” “forecast,” “anticipate,” “intend,” “plan,” “believe,” “could,” “seek,” “project,” “estimate,” and similar expressions. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: uncertainty about the global economy, risks related from transitioning our business from a traditional perpetual license software company (generally hosted by our customers on their own premises and equipment) to a subscription-based software-as-a service/cloud-based model, disruption in the retail sector, the possible effect of new U.S. tariffs on imports from other countries (and possible responsive tariffs on U.S. exports by other countries) on international commerce, delays in product development, competitive pressures, software errors, information security breaches and the risk factors set forth in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Manhattan Associates undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results.

###

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2018

2017

2018

2017

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Revenue:

Software license

$

12,973

$

20,064

$

20,528

$

41,341

Cloud subscriptions

5,377

2,378

9,846

3,874

Maintenance

36,993

35,959

73,390

69,335

Services

82,267

85,327

161,024

165,108

Hardware

4,261

10,413

7,652

17,972

Total revenue

141,871

154,141

272,440

297,630

Costs and expenses:

Cost of license

2,096

1,438

3,404

2,790

Cost of cloud subscriptions, maintenance and services

56,985

53,109

113,471

108,008

Cost of hardware

-

7,766

-

13,136

Research and development

18,176

14,102

35,235

28,327

Sales and marketing

13,809

11,732

26,693

23,521

General and administrative

12,885

11,387

25,685

23,259

Depreciation and amortization

2,235

2,326

4,437

4,588

Restructuring charge

-

3,022

-

3,022

Total costs and expenses

106,186

104,882

208,925

206,651

Operating income

35,685

49,259

63,515

90,979

Other income (loss), net

986

(68

)

1,707

(439

)

Income before income taxes

36,671

49,191

65,222

90,540

Income tax provision

9,003

18,047

14,902

31,172

Net income

$

27,668

$

31,144

$

50,320

$

59,368

Basic earnings per share

$

0.42

$

0.45

$

0.75

$

0.85

Diluted earnings per share

$

0.42

$

0.45

$

0.75

$

0.85

Weighted average number of shares:

Basic

66,429

69,227

66,987

69,610

Diluted

66,535

69,421

67,132

69,844

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

Reconciliation of Selected GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2018

2017

2018

2017

Operating income

$

35,685

$

49,259

$

63,515

$

90,979

Equity-based compensation (a)

4,927

2,796

9,270

7,268

Purchase amortization (c)

108

108

215

215

Restructuring charge (d)

-

3,022

-

3,022

Adjusted operating income (Non-GAAP)

$

40,720

$

55,185

$

73,000

$

101,484

Income tax provision

$

9,003

$

18,047

$

14,902

$

31,172

Equity-based compensation (a)

1,207

1,021

2,271

2,653

Tax benefit of stock awards vested (b)

(19

)

(93

)

730

1,875

Purchase amortization (c)

26

40

53

79

Restructuring charge (d)

-

1,103

-

1,103

U.S. Tax Cuts and Jobs Act impact (e)

-

-

348

-

Adjusted income tax provision (Non-GAAP)

$

10,217

$

20,118

$

18,304

$

36,882

Net income

$

27,668

$

31,144

$

50,320

$

59,368

Equity-based compensation (a)

3,720

1,775

6,999

4,615

Tax benefit of stock awards vested (b)

19

93

(730

)

(1,875

)

Purchase amortization (c)

82

68

162

136

Restructuring charge (d)

-

1,919

-

1,919

U.S. Tax Cuts and Jobs Act impact (e)

-

-

(348

)

-

Adjusted net income (Non-GAAP)

$

31,489

$

34,999

$

56,403

$

64,163

-

Diluted EPS

$

0.42

$

0.45

$

0.75

$

0.85

Equity-based compensation (a)

0.06

0.03

0.10

0.07

Tax benefit of stock awards vested (b)

-

-

(0.01

)

(0.03

)

Purchase amortization (c)

-

-

-

-

Restructuring charge (d)

-

0.03

-

0.03

Adjusted diluted EPS (Non-GAAP)

$

0.47

$

0.50

$

0.84

$

0.92

Fully diluted shares

66,535

69,421

67,132

69,844

(a)

Adjusted results exclude all equity-based compensation, to facilitate comparison with our peers and for the other reasons explained in our Current Report on Form 8-K filed with the SEC on the date hereof. Equity-based compensation is included in the following GAAP operating expense lines for the three and six months ended June 30, 2018 and 2017:

Three Months Ended June 30,

Six Months Ended June 30,

2018

2017

2018

2017

Cost of services

$

1,556

$

580

$

2,673

$

1,721

Research and development

1,140

434

2,061

1,154

Sales and marketing

347

393

905

1,060

General and administrative

1,884

1,389

3,631

3,333

Total equity-based compensation

$

4,927

$

2,796

$

9,270

$

7,268

(b)

Adjustments represent the excess tax benefits and tax deficiencies of the stock awards vested during the period. Excess tax benefits (deficiencies) occur when the amount deductible for an award of equity instruments on our tax return is more (less) than the cumulative compensation cost recognized for financial reporting purposes. As discussed above, we excluded equity-based compensation from adjusted non-GAAP results to be consistent with other companies in the software industry and for the other reasons explained in our Current Report on Form 8-K filed with the SEC. Therefore, we also excluded the related tax benefit (expense) generated upon their vesting.

(c)

Adjustments represent purchased intangibles amortization from a prior acquisition. We exclude that amortization from adjusted results to facilitate comparison with our peers, to facilitate comparisons of the results of our core operations from period to period and for the other reasons explained in our Current Report on Form 8-K filed with the SEC.

(d)

In May 2017, we eliminated about 100 positions due to the headwinds in the retail sector and to align our services capacity with demand. That action did not impair or alter our strategic investment plans in innovation and sales and marketing to increase market share and extend our competitive advantage. As a result of that initiative, we recorded a charge of approximately $3.0 million in the second quarter of 2017. The charge primarily consisted of employee severance and employee transition and outplacement costs. We do not believe that the charge was a cost resulting from normal operating activities. Consequently, we excluded that charge from adjusted non-GAAP results.

(e)

In the fourth quarter of 2017, we recorded a provisional net one-time tax of $2.8 million because of the enactment of the Tax Cuts and Jobs Act (the Act) in December 2017. We calculated that amount based on a reasonable estimate of the income tax effects, primarily from a tax on accumulated foreign earnings and the remeasurement of deferred tax assets. We adjusted our provisional estimate by $0.3 million during the six months ended June 30, 2018.

MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

June 30, 2018

December 31, 2017

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

79,034

$

125,522

Short-term investments

4,392

-

Accounts receivable, net of allowance of $2,753 and $2,692, respectively